1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Ley. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:28,160 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg It 5 00:00:28,280 --> 00:00:31,080 Speaker 1: got real for Wall Street yesterday to compete five hundred 6 00:00:31,240 --> 00:00:34,520 Speaker 1: equities gapping lower off the back of several headlines around 7 00:00:34,560 --> 00:00:36,879 Speaker 1: the impeachment inquiry. I want to bring in Lorie Calvasino 8 00:00:36,920 --> 00:00:40,280 Speaker 1: of MPC. She heads up the Equity strategy division over there. Laurie, 9 00:00:40,320 --> 00:00:43,200 Speaker 1: what changed for you yesterday in the last twenty four hours, 10 00:00:43,240 --> 00:00:46,280 Speaker 1: if anything at all? Well, look, I think, you know, 11 00:00:46,400 --> 00:00:49,080 Speaker 1: talking to investors about what happened yesterday, I think there's 12 00:00:49,080 --> 00:00:51,760 Speaker 1: still a state of disbelief, you know, questions I was getting, 13 00:00:51,760 --> 00:00:54,200 Speaker 1: are is this real? What will really change? I think 14 00:00:54,200 --> 00:00:56,720 Speaker 1: the street is still digesting this. But you did see 15 00:00:56,720 --> 00:00:58,880 Speaker 1: a negative reaction in the market, and we've thought that 16 00:00:58,960 --> 00:01:01,800 Speaker 1: the stage was set for a pullback anyway before year end. 17 00:01:02,160 --> 00:01:04,280 Speaker 1: This is bringing some of the potential triggers for that 18 00:01:04,319 --> 00:01:07,759 Speaker 1: into focus. Lord the regressor forward is the earnings call 19 00:01:07,880 --> 00:01:10,520 Speaker 1: for October. We spoke with b MP Perry by yesterday. 20 00:01:10,560 --> 00:01:13,840 Speaker 1: They've got an exceptionally cautious view on equities and it 21 00:01:13,920 --> 00:01:17,560 Speaker 1: centers back to earnings. What is your earning UH call 22 00:01:17,720 --> 00:01:21,839 Speaker 1: at RBC and how does it fit into owning equities today? 23 00:01:22,120 --> 00:01:24,319 Speaker 1: So we're at one six five for this year, one 24 00:01:24,440 --> 00:01:26,720 Speaker 1: seventy four for next year. You know, I think that 25 00:01:27,240 --> 00:01:31,000 Speaker 1: the concerns about second half Earnie's expectations have died down 26 00:01:31,040 --> 00:01:32,600 Speaker 1: a little bit. I do think there's going to be 27 00:01:32,680 --> 00:01:36,240 Speaker 1: some teriff adjustment that has to happen generally, though companies 28 00:01:36,280 --> 00:01:38,399 Speaker 1: have been finding a way to sort of deal with 29 00:01:38,440 --> 00:01:41,200 Speaker 1: these issues in the short term. I think the real issue, 30 00:01:41,200 --> 00:01:43,759 Speaker 1: frankly is next year. I think Arnie's expectations are way 31 00:01:43,760 --> 00:01:45,960 Speaker 1: too high. The street is still at ten percent. I'm 32 00:01:46,000 --> 00:01:48,160 Speaker 1: at five and a half percent. I have what I 33 00:01:48,160 --> 00:01:51,560 Speaker 1: think are pretty reasonable assumptions on GDP growth slowing a bit, 34 00:01:52,120 --> 00:01:54,400 Speaker 1: buy back slowing a bit. Those numbers are going to 35 00:01:54,480 --> 00:01:56,320 Speaker 1: have to be cut at some point. My guess as 36 00:01:56,320 --> 00:01:58,160 Speaker 1: we do that before the year is up. Laurie, I 37 00:01:58,160 --> 00:01:59,840 Speaker 1: know you're doing your best to look through the political 38 00:02:00,080 --> 00:02:01,840 Speaker 1: know and I also know you're adding just a little 39 00:02:01,840 --> 00:02:04,240 Speaker 1: bit of sicklicality pulling away just a little bit from 40 00:02:04,240 --> 00:02:06,760 Speaker 1: the defensive sectors in the equity market. Give us a 41 00:02:06,800 --> 00:02:09,399 Speaker 1: little bit more detail on that. So look, I think 42 00:02:09,440 --> 00:02:11,480 Speaker 1: the move in bond fields that we saw, you know, 43 00:02:11,520 --> 00:02:14,519 Speaker 1: sort of late August, early September, and that vicious style 44 00:02:14,720 --> 00:02:16,720 Speaker 1: rotation that we saw was a little bit of a 45 00:02:16,760 --> 00:02:19,520 Speaker 1: wake up call um, and I think we do, you know, 46 00:02:19,600 --> 00:02:22,080 Speaker 1: sort of we have a lot of concerns, especially on 47 00:02:22,120 --> 00:02:23,920 Speaker 1: the tariffs in the short term. You know, I'm not 48 00:02:24,000 --> 00:02:26,360 Speaker 1: convinced that this is necessarily a turning point, as a 49 00:02:26,360 --> 00:02:28,960 Speaker 1: tipping as opposed to a tipping point in the economy. 50 00:02:29,120 --> 00:02:31,399 Speaker 1: That being said, I think we're trying to look through 51 00:02:31,400 --> 00:02:33,440 Speaker 1: the day to day trading. We're trying to think about 52 00:02:33,680 --> 00:02:35,919 Speaker 1: in three or five years, what will we have wished 53 00:02:36,000 --> 00:02:39,000 Speaker 1: we did today, And we simply found we kept talking 54 00:02:39,040 --> 00:02:42,600 Speaker 1: to investors about industrial stocks, we think they're pricing in um, 55 00:02:42,680 --> 00:02:46,640 Speaker 1: pretty onerous outcomes. You're literally back at financial crisis lows 56 00:02:46,639 --> 00:02:48,959 Speaker 1: if you look at a relative pe against the broad market. 57 00:02:49,440 --> 00:02:51,360 Speaker 1: So we think that you should shouldn't be so worried 58 00:02:51,360 --> 00:02:53,480 Speaker 1: about what this quarter is going to look like. Take 59 00:02:53,520 --> 00:02:55,560 Speaker 1: advantage of the fact that they've been derisked and we 60 00:02:55,600 --> 00:02:57,840 Speaker 1: actually think you should be taking money out of consumer 61 00:02:57,880 --> 00:03:00,400 Speaker 1: stocks where all the good news and resilience is baked. 62 00:03:00,919 --> 00:03:04,760 Speaker 1: LORI thank you so much, flour Kelvinsina, RBC Company, Marcus 63 00:03:04,760 --> 00:03:22,760 Speaker 1: here at the Bloomberg Global Business Forum. This is joy John, 64 00:03:22,800 --> 00:03:24,840 Speaker 1: because this is as John tafted in his book a 65 00:03:24,919 --> 00:03:28,120 Speaker 1: number of years ago about stewardship. And what is so 66 00:03:28,200 --> 00:03:31,600 Speaker 1: wonderful here with the descendants of the Mars family of 67 00:03:31,639 --> 00:03:35,200 Speaker 1: Minnesota from years ago is they got together, they had 68 00:03:35,200 --> 00:03:38,720 Speaker 1: the courage to make with Wrigley of Chicago, and I 69 00:03:38,800 --> 00:03:41,480 Speaker 1: remember the emotion of that day. Stephen Badger joins us 70 00:03:41,600 --> 00:03:45,080 Speaker 1: right now of the Mars family and driving forward the 71 00:03:45,120 --> 00:03:48,680 Speaker 1: Mars Wrigley story as well. The company is not Mars Wrigley. 72 00:03:48,720 --> 00:03:51,720 Speaker 1: It's Mars, right, Mars Incorporated. Yes, I mean, it's so 73 00:03:51,840 --> 00:03:54,480 Speaker 1: interesting what you've brought in. You've brought in dog food, 74 00:03:54,520 --> 00:03:57,760 Speaker 1: you've brought in the chewing gunment all that. Are you 75 00:03:57,880 --> 00:04:01,520 Speaker 1: the dominant confectionery player now in the world, Well, we 76 00:04:01,560 --> 00:04:03,880 Speaker 1: would certainly in any given market be the leader. And 77 00:04:04,160 --> 00:04:05,880 Speaker 1: we have some of the leading brands in the world 78 00:04:06,120 --> 00:04:09,080 Speaker 1: with M and M's and Snickers and so forth. See 79 00:04:09,120 --> 00:04:11,600 Speaker 1: how he did that he wa, I can't concentrate. I 80 00:04:11,640 --> 00:04:14,640 Speaker 1: can't concentrate from what we were like growing up in 81 00:04:14,680 --> 00:04:17,400 Speaker 1: a family like that with with that kind of business 82 00:04:17,480 --> 00:04:20,520 Speaker 1: around you. Well, you know, it's a normal family, it 83 00:04:20,560 --> 00:04:23,920 Speaker 1: really is. Uh. You know, in normal families go through 84 00:04:24,000 --> 00:04:27,640 Speaker 1: normal family issues. That being said, we were very clear 85 00:04:27,839 --> 00:04:31,880 Speaker 1: that uh, as we matured that we had a responsibility 86 00:04:31,920 --> 00:04:34,800 Speaker 1: with regards to the business and the associates that we have, 87 00:04:34,920 --> 00:04:38,640 Speaker 1: and and really we're here today at Climate Week because 88 00:04:38,640 --> 00:04:42,719 Speaker 1: of that responsibility. We we see the science that has 89 00:04:42,760 --> 00:04:44,880 Speaker 1: been out for some period of time and which which 90 00:04:44,920 --> 00:04:47,479 Speaker 1: is only getting clear about the threat to the climate 91 00:04:47,600 --> 00:04:50,799 Speaker 1: that uh, there's a real and significant issue that needs 92 00:04:50,800 --> 00:04:55,400 Speaker 1: systemic changed and transformational action to really address the issue. 93 00:04:55,400 --> 00:04:57,560 Speaker 1: And so I think one of the great things that 94 00:04:57,560 --> 00:04:59,520 Speaker 1: that we grew up with and that I carry with 95 00:04:59,560 --> 00:05:02,600 Speaker 1: me today is that sense of responsibility. So I told 96 00:05:02,600 --> 00:05:04,280 Speaker 1: to us about the kind of things you focused on 97 00:05:04,400 --> 00:05:06,680 Speaker 1: the monment. What are you guys standing to address that? Well, 98 00:05:06,800 --> 00:05:09,320 Speaker 1: we've had for many years in place what we call 99 00:05:09,360 --> 00:05:12,320 Speaker 1: are sustainable and the generation plan that we are spending 100 00:05:12,360 --> 00:05:15,359 Speaker 1: a billion dollars on. We've also are spending a billion 101 00:05:15,360 --> 00:05:18,360 Speaker 1: dollars on what we call responsible cocoa sourcing, and we're 102 00:05:18,400 --> 00:05:21,280 Speaker 1: here this week to really advocate for the fact that 103 00:05:21,320 --> 00:05:24,679 Speaker 1: we need to all collectively step up the actions needed 104 00:05:24,720 --> 00:05:27,719 Speaker 1: to address climate change. The issue is only ever more serious. 105 00:05:27,800 --> 00:05:29,840 Speaker 1: I would suggest you're in the cross ears here on 106 00:05:30,000 --> 00:05:32,520 Speaker 1: two items. One is you make small items thing a 107 00:05:32,560 --> 00:05:36,240 Speaker 1: pack of Wrigley's Experiment gum that when my father had 108 00:05:36,279 --> 00:05:38,960 Speaker 1: for years, or you make the fame candy bars which 109 00:05:39,000 --> 00:05:41,039 Speaker 1: got me through three years of my youth. I get 110 00:05:41,080 --> 00:05:43,320 Speaker 1: that for the Mars bar, Folks is the one I 111 00:05:43,360 --> 00:05:47,320 Speaker 1: always went for. You've got the little units of sustainability 112 00:05:47,600 --> 00:05:49,960 Speaker 1: along with the messaging to children. You're here over the 113 00:05:50,000 --> 00:05:52,600 Speaker 1: head constantly about sugar. You know we don't need to 114 00:05:52,640 --> 00:05:55,680 Speaker 1: get into that today, But how do you handle sustainability 115 00:05:55,720 --> 00:06:00,919 Speaker 1: given the responsibility of kids and your small unit product show? Well, 116 00:06:00,960 --> 00:06:03,440 Speaker 1: if you look at the totality of our business, whether 117 00:06:03,480 --> 00:06:08,120 Speaker 1: it's gum or or chocolate, or pet food or other 118 00:06:08,160 --> 00:06:10,919 Speaker 1: brands like Uncle Ben's, all of those products buying large 119 00:06:10,920 --> 00:06:15,040 Speaker 1: rely upon smallholder farms around the world for their ingredients. 120 00:06:15,120 --> 00:06:18,080 Speaker 1: Explain that with a pack of gum. How does that work? Well? 121 00:06:18,240 --> 00:06:21,920 Speaker 1: Mint mint is the key ingredient in one of the 122 00:06:22,000 --> 00:06:25,200 Speaker 1: key ingredients and gum. It's grown by farmers in the US, 123 00:06:25,240 --> 00:06:28,120 Speaker 1: but also by many farmers in India who are struggling 124 00:06:28,160 --> 00:06:31,480 Speaker 1: to deal with the effects of climate change and in 125 00:06:31,640 --> 00:06:35,560 Speaker 1: how they in their growing operations, and so helping them 126 00:06:35,640 --> 00:06:39,240 Speaker 1: actually become more sustainable to generate a greater income and 127 00:06:39,320 --> 00:06:42,880 Speaker 1: also address issues like women's empowerment. Uh IN at the 128 00:06:42,920 --> 00:06:46,200 Speaker 1: local level is key to the ongoing sustainability of products 129 00:06:46,279 --> 00:06:49,080 Speaker 1: like that. You can be incredibly focused on sustainable production 130 00:06:49,240 --> 00:06:51,000 Speaker 1: and then all of a sudden, imagine there's a line 131 00:06:51,040 --> 00:06:53,960 Speaker 1: of banks and a line of investors knocking on the 132 00:06:54,000 --> 00:06:56,279 Speaker 1: door and sounding you you can do it better, you 133 00:06:56,279 --> 00:06:58,600 Speaker 1: can make more money. How do you keep slapping them 134 00:06:58,600 --> 00:07:01,039 Speaker 1: away year after yet? Well, the reality is if we 135 00:07:01,080 --> 00:07:03,880 Speaker 1: don't deal with climate change, of business doesn't face into 136 00:07:03,880 --> 00:07:06,520 Speaker 1: the reality of climate change, there there will not be 137 00:07:06,600 --> 00:07:09,040 Speaker 1: a future as we know it. Uh So for us 138 00:07:09,080 --> 00:07:11,880 Speaker 1: to have a sustainable future, we have to spend money 139 00:07:12,280 --> 00:07:14,960 Speaker 1: on this issue, and that's what we're committed to doing, 140 00:07:15,040 --> 00:07:17,720 Speaker 1: both through the commitments that we're making and trying to 141 00:07:17,720 --> 00:07:20,480 Speaker 1: galvanize the industry, as well as through our own commitments 142 00:07:20,560 --> 00:07:22,720 Speaker 1: with our business. I gotta get to the sensitive topic 143 00:07:22,760 --> 00:07:25,400 Speaker 1: as well, not just about sustainability and climate change, but 144 00:07:25,440 --> 00:07:29,320 Speaker 1: as Tom mentioned, sugar, the war against sugar, thebasity epidemic 145 00:07:29,520 --> 00:07:31,400 Speaker 1: in this country and in other other countries in the 146 00:07:31,400 --> 00:07:33,960 Speaker 1: developed world as well. What you're role going to be 147 00:07:34,040 --> 00:07:36,440 Speaker 1: in all of that, Well, obesity is a global issue 148 00:07:36,440 --> 00:07:38,840 Speaker 1: without a shadow of a doubt, uh. And we're a 149 00:07:38,880 --> 00:07:42,040 Speaker 1: food business and so we have a great responsibility to 150 00:07:42,160 --> 00:07:45,960 Speaker 1: ensure that we're marketing uh and selling our products responsibly. 151 00:07:46,040 --> 00:07:47,920 Speaker 1: We have a marketing code that's been in place for 152 00:07:47,960 --> 00:07:51,880 Speaker 1: many years and we adhere to that strictly. And it's 153 00:07:51,880 --> 00:07:54,880 Speaker 1: all about how we position our products, particularly in terms 154 00:07:54,880 --> 00:07:57,960 Speaker 1: of confectionery, as treats that are are to be enjoyed 155 00:07:57,960 --> 00:08:01,000 Speaker 1: on occasion, as opposed to you know, daily so to speak. 156 00:08:01,080 --> 00:08:02,960 Speaker 1: And what do we do about the kids where it's 157 00:08:03,000 --> 00:08:06,600 Speaker 1: not daily, it's not portion control the corporate messaging, what 158 00:08:06,640 --> 00:08:10,160 Speaker 1: do we do about the X percent of any nations 159 00:08:10,240 --> 00:08:14,600 Speaker 1: kids that don't have that discipline around them. Well, I 160 00:08:14,640 --> 00:08:17,560 Speaker 1: think it's about trying to be clear as to what 161 00:08:17,680 --> 00:08:19,640 Speaker 1: the role of a food business is, what the role 162 00:08:19,640 --> 00:08:21,720 Speaker 1: of government is, and what the role of parents are. 163 00:08:22,120 --> 00:08:25,400 Speaker 1: It's a collective issue and no one actor can solve it. 164 00:08:25,640 --> 00:08:28,080 Speaker 1: But what we can do is we can take responsibility 165 00:08:28,120 --> 00:08:30,720 Speaker 1: for our part, be very clear about that and try 166 00:08:30,760 --> 00:08:35,200 Speaker 1: to galvanize the industry to to step up agree with this. 167 00:08:35,280 --> 00:08:36,840 Speaker 1: And the thing is the parents have to have a 168 00:08:36,840 --> 00:08:40,040 Speaker 1: massive discipline here. So when the Snickers is developed, I 169 00:08:40,120 --> 00:08:44,120 Speaker 1: get half, you get half, and the time we got left, 170 00:08:44,120 --> 00:08:45,920 Speaker 1: I gotta talk. And this is wonderful that you hear 171 00:08:45,960 --> 00:08:49,320 Speaker 1: Steve Badger and we celebrate Friday, folks. I am thrilled 172 00:08:49,320 --> 00:08:51,880 Speaker 1: that Ken Burns will be with us with his magisterial 173 00:08:52,280 --> 00:08:55,640 Speaker 1: effort on national and country music. Everybody in the music 174 00:08:55,679 --> 00:08:58,400 Speaker 1: industry goes thank you, thank you, thank you, Stephen Badger 175 00:08:58,920 --> 00:09:01,520 Speaker 1: for what you did with the House of Wilson Pickett. 176 00:09:01,600 --> 00:09:06,040 Speaker 1: Muscle Shoals is beloved. There's a sound, there's an authenticity there. 177 00:09:06,080 --> 00:09:08,760 Speaker 1: It goes back to him and B Three's did things 178 00:09:08,840 --> 00:09:11,760 Speaker 1: that no one had ever heard before. What was it 179 00:09:11,840 --> 00:09:15,360 Speaker 1: like to put together your wonderful film and Muscle Shoals? Well, 180 00:09:15,400 --> 00:09:17,520 Speaker 1: thank you, You're so kind of reference that it was. 181 00:09:17,920 --> 00:09:20,320 Speaker 1: It was it was incredible, I mean it was. It 182 00:09:20,360 --> 00:09:23,600 Speaker 1: was an emotional journey, a spiritual journey, a lot of 183 00:09:23,640 --> 00:09:26,800 Speaker 1: hard work and it was a great joy and honor 184 00:09:26,880 --> 00:09:29,000 Speaker 1: to be able to engage with the folks in Muscle 185 00:09:29,000 --> 00:09:31,800 Speaker 1: Shoals and the other artists who made that. Lack has 186 00:09:31,800 --> 00:09:34,720 Speaker 1: his wonderful movie Catholic Records of Beyonce, and in it 187 00:09:34,800 --> 00:09:37,640 Speaker 1: they've got the Stones show up in nineteen sixty whatever, 188 00:09:37,679 --> 00:09:40,360 Speaker 1: like Children from England. Did you talk to Mick Jagger 189 00:09:40,440 --> 00:09:42,439 Speaker 1: or any of the Stones about Muscle Shoals. I had 190 00:09:42,440 --> 00:09:44,960 Speaker 1: the great pleasure and opportunity to talk to Keith and 191 00:09:45,040 --> 00:09:48,959 Speaker 1: to Mick uh and they couldn't have been more gracious 192 00:09:49,040 --> 00:09:52,079 Speaker 1: and and um have a greater love for Muscle Shoals 193 00:09:52,160 --> 00:09:55,040 Speaker 1: than you know I then I would have expected. And 194 00:09:55,040 --> 00:09:57,960 Speaker 1: and more more recently in terms of some of the 195 00:09:58,000 --> 00:10:00,199 Speaker 1: heroes and Muscle Shoals, Rick Hall, the dear Rick Hall 196 00:10:00,240 --> 00:10:02,679 Speaker 1: has passed away. Jimmy Johnson just passed away. I didn't 197 00:10:02,679 --> 00:10:04,480 Speaker 1: know that. So to be able to capture those guys 198 00:10:04,520 --> 00:10:08,040 Speaker 1: on film before that transparred was great. Like he's got 199 00:10:08,040 --> 00:10:11,920 Speaker 1: a terrible job, isn't it still on the planet. I mean, 200 00:10:12,200 --> 00:10:14,360 Speaker 1: Chuck Levols been a wonderful friend of the show up 201 00:10:14,400 --> 00:10:16,599 Speaker 1: playing with the Stones keyboards. He's with us once or 202 00:10:16,600 --> 00:10:21,080 Speaker 1: twice a year on himself, and he talks about the room. Sound. 203 00:10:21,640 --> 00:10:23,560 Speaker 1: I mean, it's all about the room, isn't it. It's 204 00:10:23,600 --> 00:10:27,319 Speaker 1: it's a concrete block, right, It's town. It's town, absolutely, Steven. 205 00:10:27,360 --> 00:10:30,400 Speaker 1: A final question in it comes from home. It comes 206 00:10:30,400 --> 00:10:33,000 Speaker 1: from my mom. Oh you're the Good Morning was about 207 00:10:33,040 --> 00:10:35,400 Speaker 1: many decades the Snickers Bar used to be called the 208 00:10:35,440 --> 00:10:38,760 Speaker 1: Marathon Bar in the UK. But we're gonna make that 209 00:10:38,880 --> 00:10:41,280 Speaker 1: change again. Can we have a special edition? I wish 210 00:10:41,320 --> 00:10:43,600 Speaker 1: I could say otherwise, but no. We we moved it 211 00:10:43,600 --> 00:10:46,079 Speaker 1: to Snickers because we're a global business. We operate in 212 00:10:46,120 --> 00:10:48,760 Speaker 1: eighty countries and they're just are some efficiencies that come 213 00:10:48,760 --> 00:10:55,040 Speaker 1: along with Yeah, there's God bless this is this is 214 00:10:55,040 --> 00:10:57,120 Speaker 1: a can we tell company secrets here with Steve bar 215 00:10:57,200 --> 00:10:59,200 Speaker 1: please day carry. I come out of the meeting every 216 00:10:59,200 --> 00:11:01,240 Speaker 1: morning usually was team coming out of my years and 217 00:11:01,280 --> 00:11:03,880 Speaker 1: the only thing that saves me is I wander by 218 00:11:03,920 --> 00:11:06,840 Speaker 1: the desk of a hundred and six mayor of New York. 219 00:11:07,080 --> 00:11:10,040 Speaker 1: There's a small candy thing and it is a Mars 220 00:11:10,120 --> 00:11:13,880 Speaker 1: container and Mike Bloomberg every single morning saves me with 221 00:11:13,920 --> 00:11:16,000 Speaker 1: the TwixT. Well, thank you. We we need we need 222 00:11:16,040 --> 00:11:18,600 Speaker 1: to make sure that he's a wealth stocked going into 223 00:11:18,600 --> 00:11:20,840 Speaker 1: the future, Steven, great to catch up you, thank you, 224 00:11:20,880 --> 00:11:23,760 Speaker 1: thank you, Stephen Badger of the mass Family. Fasciniting conversation. 225 00:11:23,800 --> 00:11:40,199 Speaker 1: Tell how much more coming up? This is an annual visit. 226 00:11:40,200 --> 00:11:42,079 Speaker 1: We're going to crow bar him in here right now. 227 00:11:42,240 --> 00:11:45,520 Speaker 1: Dr Ferguson, of course, his public service at the Federal 228 00:11:45,559 --> 00:11:50,560 Speaker 1: Reserve System serving Sherman Greenspan, and particularly on September eleven, 229 00:11:50,720 --> 00:11:54,120 Speaker 1: his esteemed academics, his public service to the Economic Club 230 00:11:54,120 --> 00:11:56,120 Speaker 1: of New York is should point out. I get to 231 00:11:56,200 --> 00:12:00,760 Speaker 1: enjoy the lunches. Roger Ferguson serves at the Economic uh 232 00:12:00,040 --> 00:12:03,480 Speaker 1: of New York as well. But I really want to 233 00:12:03,480 --> 00:12:07,840 Speaker 1: devote this entire time with Vice Chairman Ferguson to his 234 00:12:08,000 --> 00:12:11,200 Speaker 1: true expertise with t I A and his public leadership. 235 00:12:12,000 --> 00:12:14,079 Speaker 1: And I don't know if it's a number one problem 236 00:12:14,080 --> 00:12:16,600 Speaker 1: in the nation, Roger, but let's just begin by saying, 237 00:12:16,640 --> 00:12:21,720 Speaker 1: retirement in America is in a terrible, terrible state. Good morning. 238 00:12:22,800 --> 00:12:26,000 Speaker 1: We we talked to you a year ago. In my 239 00:12:26,080 --> 00:12:29,520 Speaker 1: frustration is just do something. How close are we to 240 00:12:29,559 --> 00:12:31,720 Speaker 1: a Roger Ferguson. I mean, you're one of the most 241 00:12:31,720 --> 00:12:34,880 Speaker 1: impatient guys I know in the crucible of a meeting. 242 00:12:35,000 --> 00:12:40,600 Speaker 1: How close are we to ferguson immediacy in slow motion Washington? Look, 243 00:12:40,600 --> 00:12:42,360 Speaker 1: I think we're a long way away from it. Frankly, 244 00:12:42,840 --> 00:12:45,520 Speaker 1: on the other hand, there are some green shoots that 245 00:12:45,559 --> 00:12:47,920 Speaker 1: might give us some optimism that we're returning to this 246 00:12:48,040 --> 00:12:53,240 Speaker 1: really big, important, long term issue. So, um, why don't 247 00:12:53,240 --> 00:12:55,720 Speaker 1: I say we're a long way away from it? Every Congressman, 248 00:12:55,800 --> 00:12:59,200 Speaker 1: every Senator must have the constituent saying, look, it was 249 00:12:59,240 --> 00:13:02,240 Speaker 1: all best in engines, but actually it is not worked 250 00:13:02,320 --> 00:13:06,640 Speaker 1: out for anybody of any given age. The incentivizing of 251 00:13:06,720 --> 00:13:10,160 Speaker 1: younger people, the middle age, those confronting the failure of 252 00:13:10,200 --> 00:13:14,720 Speaker 1: Arissa seventy four that do something is front center. Why 253 00:13:15,080 --> 00:13:18,439 Speaker 1: is its slow motion in Washington? It's slow motion Washington 254 00:13:18,559 --> 00:13:22,280 Speaker 1: because this is one of those really long term, slow 255 00:13:22,440 --> 00:13:27,080 Speaker 1: moving challenges. It's not an immediate crisis. Washington, I think 256 00:13:27,200 --> 00:13:31,360 Speaker 1: is wired towards the immediacy of the headline. And this 257 00:13:31,520 --> 00:13:34,280 Speaker 1: challenge is, you know, to use a cliche, a bit 258 00:13:34,280 --> 00:13:39,200 Speaker 1: of a melting iceberg, and society, policymakers, etcetera. All turn 259 00:13:39,240 --> 00:13:42,360 Speaker 1: their attention much more slowly to these slow moving challenges. 260 00:13:42,880 --> 00:13:45,280 Speaker 1: The second reason why it's it's a little bit difficult. 261 00:13:45,400 --> 00:13:49,200 Speaker 1: Is the answers are all difficult. Um, you know, figuring 262 00:13:49,200 --> 00:13:53,319 Speaker 1: out how to fix Social Security means for sure, maybe 263 00:13:53,440 --> 00:13:57,560 Speaker 1: touching retirement age, which people are uncomfortable increasing retirement age 264 00:13:57,600 --> 00:14:01,240 Speaker 1: and may mean cutting benefits for certain of people, may 265 00:14:01,280 --> 00:14:05,120 Speaker 1: mean increasing taxes. All of those are tough calls. Politicians 266 00:14:05,120 --> 00:14:09,120 Speaker 1: are not wired towards making the toughest calls very very quickly. 267 00:14:09,280 --> 00:14:11,840 Speaker 1: So Dr Fergus, just for our listening audience, could you 268 00:14:11,880 --> 00:14:15,240 Speaker 1: scale out what you think is really again kind of 269 00:14:15,240 --> 00:14:17,960 Speaker 1: the scale of the issue, the problem some just some 270 00:14:18,000 --> 00:14:22,520 Speaker 1: broad numbers. Okay, So let me start with my uh friends, 271 00:14:22,520 --> 00:14:25,120 Speaker 1: former colleagues were fed. They've come up with numbers of 272 00:14:25,280 --> 00:14:29,960 Speaker 1: a shortfall and retirement savings of anywhere from four to 273 00:14:30,120 --> 00:14:35,320 Speaker 1: seven trillion dollars. So that's a massive number. Another way 274 00:14:35,320 --> 00:14:38,280 Speaker 1: to think about it is only about half of Americans 275 00:14:38,280 --> 00:14:43,440 Speaker 1: have access to retirement savings at work. So that's the 276 00:14:43,480 --> 00:14:47,200 Speaker 1: second way to think about it is stunning. Third way 277 00:14:47,200 --> 00:14:49,160 Speaker 1: to think about it, it's something we already know, which 278 00:14:49,240 --> 00:14:52,600 Speaker 1: is that you know, more than half of Americans couldn't 279 00:14:52,640 --> 00:14:57,000 Speaker 1: get hold of four hundred dollars for an emergency, and 280 00:14:57,080 --> 00:15:00,680 Speaker 1: so there are lots of different ways to scale this problem. 281 00:15:00,760 --> 00:15:03,440 Speaker 1: As this problem, he's gotten worse, is it? How has 282 00:15:03,480 --> 00:15:06,080 Speaker 1: it evolved over the last couple of generations. Well, it's 283 00:15:06,080 --> 00:15:09,200 Speaker 1: actually gotten more. So Here's here's what's happened. For our 284 00:15:09,240 --> 00:15:13,040 Speaker 1: grandparents generation. The vast majority of them had of retirement 285 00:15:13,080 --> 00:15:17,760 Speaker 1: plan at work called a defined benefit plan. Now only 286 00:15:17,800 --> 00:15:21,440 Speaker 1: about ten of Americans have a defined benefit plan. So 287 00:15:21,480 --> 00:15:24,560 Speaker 1: the vast majority of Americas now defend on a so 288 00:15:24,680 --> 00:15:28,520 Speaker 1: called defined contribution plan. And that has pushed risk from 289 00:15:28,760 --> 00:15:32,040 Speaker 1: the company to the individuals at a point when we 290 00:15:32,080 --> 00:15:35,000 Speaker 1: know individuals have a low level of financial literacy, so 291 00:15:35,400 --> 00:15:37,800 Speaker 1: the problem has become more challenging. If you're just joining us, 292 00:15:37,880 --> 00:15:40,280 Speaker 1: the former vice Chairman of the Federal Reserve System, Roger 293 00:15:40,320 --> 00:15:42,640 Speaker 1: Ferguson with us an annual visit here at the Bloomberg 294 00:15:42,640 --> 00:15:45,480 Speaker 1: Global Business Forum, and we're thrilled to focus on his 295 00:15:45,640 --> 00:15:50,000 Speaker 1: true expertise and leadership in America's retirement crisis. The Times 296 00:15:50,040 --> 00:15:54,000 Speaker 1: of London two weeks ago Roger the business section, the 297 00:15:54,040 --> 00:15:57,720 Speaker 1: big headline the annuity. You get a retirement pot, you 298 00:15:57,760 --> 00:15:59,840 Speaker 1: buy a life annuity for you and your wife whatever. 299 00:16:00,360 --> 00:16:03,120 Speaker 1: The annuity at a number of four point one percent. 300 00:16:03,640 --> 00:16:07,160 Speaker 1: We are nowhere near the proper actual assumption, are we 301 00:16:07,400 --> 00:16:10,320 Speaker 1: That's exactly right. Uh, And that's yet another thing that 302 00:16:10,360 --> 00:16:13,040 Speaker 1: makes us challenging. So in an interest a low interest 303 00:16:13,120 --> 00:16:16,880 Speaker 1: rate environment, lower for longer, may be lower forever. There's 304 00:16:16,920 --> 00:16:20,280 Speaker 1: no doubt that generating the returns have become more difficult. 305 00:16:20,760 --> 00:16:25,640 Speaker 1: There's a solution of that, which is a broadly diversified portfolio. Right, 306 00:16:25,680 --> 00:16:28,080 Speaker 1: And so people think of retirement is being driven by 307 00:16:28,360 --> 00:16:32,000 Speaker 1: fixed income and think of low interest rates. But the 308 00:16:32,040 --> 00:16:34,720 Speaker 1: reality is a really good retirement will be driven by 309 00:16:34,920 --> 00:16:40,280 Speaker 1: fixed income, by alternatives, by equities, thereby giving a chance 310 00:16:40,320 --> 00:16:43,720 Speaker 1: to get to a much more sustainable retirement income. And 311 00:16:43,760 --> 00:16:46,080 Speaker 1: so one has to think about, you know, the basic 312 00:16:46,200 --> 00:16:49,800 Speaker 1: rules of investing apply for retirement as well as anything else, 313 00:16:49,840 --> 00:16:53,160 Speaker 1: and diversification is one of those basic rules which will 314 00:16:53,200 --> 00:16:56,320 Speaker 1: help overcome the challenge that we're currently seeing. So as 315 00:16:56,360 --> 00:16:58,360 Speaker 1: we think about, you know, thinking about some of the 316 00:16:58,680 --> 00:17:02,040 Speaker 1: solution to this grand problem, which is so complex, it 317 00:17:02,160 --> 00:17:04,200 Speaker 1: sounds like it might be one of those situations where 318 00:17:04,200 --> 00:17:08,359 Speaker 1: it's some combination of government, of corporate, the private sector, 319 00:17:08,440 --> 00:17:11,080 Speaker 1: of educating the individual. I mean, it seems like it's 320 00:17:11,600 --> 00:17:13,600 Speaker 1: it can't just be the government stepping in and no, no, 321 00:17:13,880 --> 00:17:19,680 Speaker 1: And the reality is to rethink retirement involves three separate components. UH. 322 00:17:20,080 --> 00:17:23,760 Speaker 1: Government for sure, because the government drives social security, and 323 00:17:23,800 --> 00:17:26,480 Speaker 1: here we need to think about reforming social security. The 324 00:17:26,480 --> 00:17:30,280 Speaker 1: Social Security administrators have told us that the trust fund 325 00:17:30,640 --> 00:17:34,000 Speaker 1: UH will be pretty much out of out of gas, 326 00:17:34,040 --> 00:17:39,600 Speaker 1: so to speak, UH, completely utilized by the twenty seventeen 327 00:17:39,960 --> 00:17:43,880 Speaker 1: I'm sorry, something like that, maybe a little further out. 328 00:17:44,520 --> 00:17:47,560 Speaker 1: And so we do need government solutions in that space. UM. 329 00:17:47,600 --> 00:17:50,080 Speaker 1: The government can also help by setting up rules and 330 00:17:50,119 --> 00:17:54,000 Speaker 1: regulations that help create more savings in the private sector. 331 00:17:54,280 --> 00:17:57,040 Speaker 1: So there's an act now in Congress called the Secure 332 00:17:57,280 --> 00:18:00,919 Speaker 1: Act has been passed in the House, has passed the Senate. 333 00:18:01,440 --> 00:18:04,080 Speaker 1: That would be very helpful in creating more safe and 334 00:18:04,080 --> 00:18:06,720 Speaker 1: secure retirement. So we need to get government acting in 335 00:18:06,800 --> 00:18:09,280 Speaker 1: that way to increase the private sector. Can I ask 336 00:18:09,280 --> 00:18:12,240 Speaker 1: a dumb question of the day, I do I do 337 00:18:12,440 --> 00:18:16,280 Speaker 1: and ariska define contribution. Whatever the program is, I get 338 00:18:16,480 --> 00:18:19,480 Speaker 1: immediate tax savings which can build the growth and down 339 00:18:19,520 --> 00:18:22,439 Speaker 1: the road, I end up paying the taxes due to 340 00:18:22,480 --> 00:18:25,639 Speaker 1: the government. Why does the government, Why are they so 341 00:18:25,760 --> 00:18:29,200 Speaker 1: reticent to let anyone put more money into their account 342 00:18:29,480 --> 00:18:31,800 Speaker 1: if they know they're going to get the money eventually, well, 343 00:18:31,800 --> 00:18:33,600 Speaker 1: you put your finger on it, it's actually the time 344 00:18:33,680 --> 00:18:39,240 Speaker 1: value of money. And so they're concerned that broke. Look 345 00:18:39,280 --> 00:18:41,480 Speaker 1: the laying trillions of dollars and taxes until all of 346 00:18:41,560 --> 00:18:43,479 Speaker 1: us get to be seventy or seventy two. It's not 347 00:18:43,560 --> 00:18:45,600 Speaker 1: to be taken lightly when you think about the state, 348 00:18:46,359 --> 00:18:49,280 Speaker 1: the fiscal situation United States, and so you know, the 349 00:18:49,320 --> 00:18:53,520 Speaker 1: tax view around retirement has always been we're willing to 350 00:18:53,600 --> 00:18:57,320 Speaker 1: let you differ, but until a certain age, and then 351 00:18:57,400 --> 00:18:59,800 Speaker 1: you know, it's seventy two and a half. They required 352 00:18:59,840 --> 00:19:01,879 Speaker 1: the distributions in part to make sure they get the 353 00:19:01,880 --> 00:19:04,200 Speaker 1: taxes paid where they're going to get the Texas paid 354 00:19:04,200 --> 00:19:07,040 Speaker 1: down the road. We've got experts at what what number 355 00:19:07,640 --> 00:19:12,959 Speaker 1: of people across the broad American wage paying wtube landscape 356 00:19:13,280 --> 00:19:17,280 Speaker 1: are below their actual assumption. It's a big statistic. It's 357 00:19:17,320 --> 00:19:19,919 Speaker 1: a big statistic at this stage, What where is the 358 00:19:20,119 --> 00:19:23,040 Speaker 1: urgency if there's no cost to the government other than 359 00:19:23,080 --> 00:19:26,000 Speaker 1: as you correctly state, the time value of money. That's 360 00:19:26,080 --> 00:19:28,040 Speaker 1: that's part of the issue. And you know, the urgency 361 00:19:28,080 --> 00:19:30,720 Speaker 1: is starting to come from the citizen to me. As 362 00:19:30,760 --> 00:19:33,480 Speaker 1: we all get older and older, and we start to 363 00:19:33,520 --> 00:19:36,880 Speaker 1: recognize the insecurity that we face around retirement, and that's 364 00:19:36,880 --> 00:19:38,800 Speaker 1: going to drive what happens in more. I mean, Paul, 365 00:19:38,840 --> 00:19:42,520 Speaker 1: the number of people I know older than me who 366 00:19:42,600 --> 00:19:48,320 Speaker 1: are seriously looking to move abroad because they can't afford 367 00:19:48,400 --> 00:19:53,000 Speaker 1: to retire here. Those are tangible numbers for people thinking. 368 00:19:53,240 --> 00:19:56,080 Speaker 1: You know, obviously it's always been Florida, but even North Carolina, 369 00:19:56,200 --> 00:19:59,040 Speaker 1: low tax states, things like that. But I haven't heard 370 00:19:59,119 --> 00:20:03,359 Speaker 1: they're moving to Pan Costa Rica. Thailand is very popular. Yeah, 371 00:20:03,400 --> 00:20:10,080 Speaker 1: you know Italy, I mean Rogers, you know, this is 372 00:20:10,160 --> 00:20:12,680 Speaker 1: very popular, right, These low income states are very very popular. 373 00:20:12,800 --> 00:20:15,720 Speaker 1: What is the study that you have researched at T. I. A. 374 00:20:15,840 --> 00:20:19,560 Speaker 1: Kraft about across different death stiles of the American population. 375 00:20:20,240 --> 00:20:22,200 Speaker 1: If you say you can put in all you want, 376 00:20:22,320 --> 00:20:24,960 Speaker 1: do they put in more money? The answer is it 377 00:20:25,040 --> 00:20:27,760 Speaker 1: depends um. And so what we see for the younger 378 00:20:27,760 --> 00:20:32,760 Speaker 1: individuals is because of the student loan and students issues, 379 00:20:33,240 --> 00:20:37,399 Speaker 1: they are delaying retirement and delaying putting money into retirement. 380 00:20:38,040 --> 00:20:41,320 Speaker 1: Middle income folks tend to be doing better, and obviously 381 00:20:41,359 --> 00:20:46,280 Speaker 1: the older individuals are staying with a frenzy, perhaps because 382 00:20:46,280 --> 00:20:49,000 Speaker 1: they started too late um. And so what this is 383 00:20:49,000 --> 00:20:52,080 Speaker 1: all ending up with is another study that we did 384 00:20:52,080 --> 00:20:55,720 Speaker 1: recently that shows is the degree of financial insecurity is 385 00:20:55,920 --> 00:20:58,119 Speaker 1: very high. So we surveyed a bunch of folks on 386 00:20:58,119 --> 00:20:59,960 Speaker 1: only about a third of them said they were feeling sick. 387 00:21:00,040 --> 00:21:03,640 Speaker 1: You're about their retirements. We've got people listening worldwide. Al 388 00:21:03,720 --> 00:21:05,639 Speaker 1: from New Jersey emails in and says, when you talk 389 00:21:05,720 --> 00:21:07,800 Speaker 1: to about something that matters, because they Al's got his 390 00:21:07,880 --> 00:21:11,920 Speaker 1: retirement all set up. I believe Vice Chairman Ferguson I 391 00:21:12,200 --> 00:21:14,360 Speaker 1: there's any number of ways to go with a beleaguer 392 00:21:14,440 --> 00:21:17,959 Speaker 1: Chairman Powell, the criticism to the FED and FED independence, 393 00:21:17,960 --> 00:21:20,800 Speaker 1: we've got the repo uproar of the recent days. I 394 00:21:20,840 --> 00:21:22,920 Speaker 1: want to talk to you about something that you're quite 395 00:21:22,960 --> 00:21:25,840 Speaker 1: good at. And this is off of your steam work 396 00:21:25,880 --> 00:21:30,320 Speaker 1: at Harvard, which is the experiment of negative interest rates. 397 00:21:30,359 --> 00:21:33,200 Speaker 1: This wasn't This wasn't on the chalkboard at Harvard, was it. 398 00:21:33,359 --> 00:21:35,800 Speaker 1: This was not on the chalkboard at Harvard, nor wasn't 399 00:21:35,840 --> 00:21:37,639 Speaker 1: on the chalkboard at m I T on the University 400 00:21:37,680 --> 00:21:42,240 Speaker 1: of Chicago. So they we are in uncharted territory. UH 401 00:21:42,400 --> 00:21:46,560 Speaker 1: sixteen seventy trillion dollars a debt carrying negative interest rates 402 00:21:47,119 --> 00:21:50,119 Speaker 1: never a place that we've studied, UH, and frankly, I 403 00:21:50,119 --> 00:21:52,720 Speaker 1: think not a place any of us ever expected to be. 404 00:21:52,880 --> 00:21:55,680 Speaker 1: Let's take the dynamics of someone who competent as Richard 405 00:21:55,720 --> 00:21:58,640 Speaker 1: Clarative Columbia, who has your shingle out at the FED 406 00:21:58,800 --> 00:22:01,880 Speaker 1: right now and expert on DSG. We won't go into 407 00:22:01,960 --> 00:22:03,800 Speaker 1: that because we're at the plaza where it would be 408 00:22:03,840 --> 00:22:06,680 Speaker 1: unsightly to speak of something. So there was like that 409 00:22:06,800 --> 00:22:09,840 Speaker 1: sculpture over there's half dress Paul here at the plot? 410 00:22:09,920 --> 00:22:14,959 Speaker 1: What is this about this family Entertainment UM vice chairman first? 411 00:22:15,000 --> 00:22:19,000 Speaker 1: And the glide path from negative to whatever normal is 412 00:22:19,040 --> 00:22:21,800 Speaker 1: gonna be? Can we do this with stability? Can the 413 00:22:21,920 --> 00:22:26,320 Speaker 1: drift function, the reaction functions be in control. I think 414 00:22:26,400 --> 00:22:29,399 Speaker 1: that's a really strong and important question, right. UH we 415 00:22:29,440 --> 00:22:33,720 Speaker 1: saw a few years ago when UH then Chairman Banankee 416 00:22:33,760 --> 00:22:38,560 Speaker 1: mentioned normalizing rates. There is a so called taper tantrum 417 00:22:38,560 --> 00:22:43,240 Speaker 1: where markets got very excited UM about the possibility of normalizing. 418 00:22:43,320 --> 00:22:46,280 Speaker 1: So I think there are some red, some yellow flags 419 00:22:46,280 --> 00:22:48,160 Speaker 1: saying as we move in Europe, not in the US, 420 00:22:48,240 --> 00:22:50,640 Speaker 1: but is Europe tries to move from negative to more 421 00:22:50,680 --> 00:22:53,080 Speaker 1: normal rates. You know, a lot of that economy has 422 00:22:53,080 --> 00:22:55,920 Speaker 1: gotten used to negative rights and the possibility of some 423 00:22:56,240 --> 00:22:59,600 Speaker 1: instability cannot be ignored, can't be discounted. What do you 424 00:22:59,600 --> 00:23:02,359 Speaker 1: think that is for some of these European economies that 425 00:23:02,400 --> 00:23:04,919 Speaker 1: are experiencing negative rates in half for some time, what 426 00:23:05,040 --> 00:23:08,320 Speaker 1: is the path for them to get to more Look 427 00:23:08,359 --> 00:23:10,280 Speaker 1: what the Europeans, I think we're working to try to 428 00:23:10,320 --> 00:23:13,040 Speaker 1: do is to get two things happening that haven't happened 429 00:23:13,040 --> 00:23:17,120 Speaker 1: thus far. First, get their economies, pickly their largest economies, 430 00:23:17,240 --> 00:23:19,920 Speaker 1: you know, off of this borderline area where a few 431 00:23:19,960 --> 00:23:23,360 Speaker 1: of them might. One might argue Italy, maybe Germany are 432 00:23:23,440 --> 00:23:25,840 Speaker 1: in or close to recession for a variety of reasons. 433 00:23:25,880 --> 00:23:28,760 Speaker 1: Others may be slowing. They also are working hard to 434 00:23:28,800 --> 00:23:32,320 Speaker 1: get inflation as others are back closer to their targets. 435 00:23:32,760 --> 00:23:35,360 Speaker 1: Once those two things start to occur, then you will 436 00:23:35,400 --> 00:23:38,320 Speaker 1: be able to start to see rates normalize. Uh, the 437 00:23:38,359 --> 00:23:40,800 Speaker 1: same thing. It's also two in Switzerland. So this is 438 00:23:40,840 --> 00:23:44,040 Speaker 1: a big macroeconomic challenge. And they've been at this place 439 00:23:44,160 --> 00:23:46,679 Speaker 1: and fighting this for a long period of time, and 440 00:23:46,760 --> 00:23:49,600 Speaker 1: you know, we wish them best because the European economy 441 00:23:49,640 --> 00:23:52,640 Speaker 1: is one of what could be one of the one 442 00:23:52,680 --> 00:23:54,840 Speaker 1: of the drivers for global growth. I know when you 443 00:23:54,880 --> 00:23:58,040 Speaker 1: were on the Charles River, you didn't you ignored Chicago 444 00:23:58,119 --> 00:24:01,679 Speaker 1: and microeconomics, not at all. We had a conversation with 445 00:24:02,160 --> 00:24:04,520 Speaker 1: Dudley of the New York FED the other day, the 446 00:24:04,560 --> 00:24:08,200 Speaker 1: micro economist from Berkeley, and it's really interesting to see 447 00:24:08,200 --> 00:24:13,320 Speaker 1: the behavioral function and the microeconomic dynamics of something like 448 00:24:13,359 --> 00:24:17,359 Speaker 1: the repurchase agreement. Or do you have confidence in a 449 00:24:17,440 --> 00:24:19,680 Speaker 1: New York FED and John Williams and the new team 450 00:24:19,720 --> 00:24:21,800 Speaker 1: there to get it done and do it right? Absolutely, 451 00:24:21,800 --> 00:24:23,240 Speaker 1: I have a high, de great confidence John and the 452 00:24:23,280 --> 00:24:25,040 Speaker 1: team with the New York FED. I think what they're 453 00:24:25,040 --> 00:24:28,560 Speaker 1: confronting the repo market was, you know, trying to understand 454 00:24:28,560 --> 00:24:31,399 Speaker 1: the amount of reserves, the sort of technical that have 455 00:24:31,480 --> 00:24:34,800 Speaker 1: to be held by the FED to get the market 456 00:24:34,840 --> 00:24:38,120 Speaker 1: itself to do its business, UH, to set the repo 457 00:24:38,280 --> 00:24:40,280 Speaker 1: rate the right way. And this is a new territory 458 00:24:40,359 --> 00:24:43,280 Speaker 1: for for the FED, so one would expect to see 459 00:24:43,359 --> 00:24:46,159 Speaker 1: every once in a while just a little bit of 460 00:24:46,200 --> 00:24:48,560 Speaker 1: the rough edges as the markets and the FED get 461 00:24:48,640 --> 00:24:50,800 Speaker 1: used to a new process. But they're moving in the 462 00:24:50,840 --> 00:24:52,840 Speaker 1: right direction. I have a high confidence in John and 463 00:24:52,920 --> 00:24:55,600 Speaker 1: the team. Did President Bush the younger ever tweet out 464 00:24:55,640 --> 00:24:59,239 Speaker 1: on Roger Ferguson, I think of the crucival you were 465 00:24:59,280 --> 00:25:02,480 Speaker 1: in an early sub member of two thousand eleven two one. 466 00:25:03,000 --> 00:25:04,720 Speaker 1: It wasn't funny. You didn't have to put up with 467 00:25:04,760 --> 00:25:07,879 Speaker 1: presidential tweets. Right. Well, I'll be honest with you. Um, 468 00:25:07,960 --> 00:25:11,399 Speaker 1: you know there has been periods on and off presidential 469 00:25:11,440 --> 00:25:14,600 Speaker 1: pressure on the FED. Um, this one is highly unusual, 470 00:25:15,040 --> 00:25:17,399 Speaker 1: and that it is so public. But if you go 471 00:25:17,480 --> 00:25:19,520 Speaker 1: back to the history of the FED, L B J 472 00:25:20,160 --> 00:25:23,440 Speaker 1: l B J. Richard Nixon knows, you know, come over 473 00:25:23,440 --> 00:25:26,879 Speaker 1: and have a quiet talk moment um and so, you know, 474 00:25:27,119 --> 00:25:30,399 Speaker 1: not surprising given how powerful the FED is to have 475 00:25:30,480 --> 00:25:33,119 Speaker 1: these kinds of press. You mentioned the pit bull, Roger 476 00:25:33,160 --> 00:25:37,960 Speaker 1: Ferguson on the balcony, the particle there, but conversation giving 477 00:25:38,040 --> 00:25:40,639 Speaker 1: it back. Yeah, but aether thing. You have to recognize 478 00:25:40,640 --> 00:25:43,520 Speaker 1: that j Pal has been very clear about protecting the 479 00:25:43,520 --> 00:25:46,000 Speaker 1: independence of the FED. So we give the FED, I 480 00:25:46,040 --> 00:25:48,760 Speaker 1: give the FED others. Do you know a lot of 481 00:25:48,920 --> 00:25:52,520 Speaker 1: a lot of credibility right now putting up with some Yeah, 482 00:25:52,640 --> 00:25:55,160 Speaker 1: tough and difficult times. Roger Ferguson, thank you so much. 483 00:25:55,160 --> 00:26:10,320 Speaker 1: Particularly with T I A this conversation on retirement in America. 484 00:26:12,320 --> 00:26:14,239 Speaker 1: This is a joy. And he has come to us 485 00:26:14,359 --> 00:26:19,560 Speaker 1: on impeachment. Short notice. He is Professor Sunstein of Harvard University. 486 00:26:20,000 --> 00:26:22,720 Speaker 1: For anybody that knows me, he was way out front 487 00:26:22,800 --> 00:26:25,560 Speaker 1: on impeachment. And I made it a book of the summer. 488 00:26:26,560 --> 00:26:29,680 Speaker 1: It is readable, it is short, it is must must 489 00:26:29,760 --> 00:26:33,160 Speaker 1: read on this strange word, and the joy of it 490 00:26:33,280 --> 00:26:37,080 Speaker 1: is Cass Sunstein, who has been affiliated with Republicans and Democrats. 491 00:26:37,119 --> 00:26:40,960 Speaker 1: Of course, his recent public service to President Obama kept 492 00:26:40,960 --> 00:26:42,639 Speaker 1: the T word out of it. He does not mention 493 00:26:42,720 --> 00:26:45,919 Speaker 1: President Trump in a hundred and seventy five pages of 494 00:26:46,000 --> 00:26:49,720 Speaker 1: your need to understand the word impeachment. Professor Sunstein, thank 495 00:26:49,760 --> 00:26:52,960 Speaker 1: you so much for joining us today. Great pleasure to 496 00:26:52,960 --> 00:26:56,000 Speaker 1: be here. Cass. Your book is so important. You begin 497 00:26:56,080 --> 00:26:59,800 Speaker 1: with James Madison and Walso's through the founders, and then 498 00:27:00,000 --> 00:27:03,439 Speaker 1: of the modern age. How did the comments of Speaker 499 00:27:03,520 --> 00:27:08,120 Speaker 1: Pelosi yesterday link to the impeachments of Clinton and Nixon 500 00:27:08,680 --> 00:27:13,080 Speaker 1: or will this be a new and discrete process. I 501 00:27:13,160 --> 00:27:16,040 Speaker 1: think they linked pretty well in the sense that the 502 00:27:16,160 --> 00:27:19,800 Speaker 1: general tenor of her remarks were connected with the I 503 00:27:19,840 --> 00:27:24,400 Speaker 1: think legitimate inquiry into President Nixon and the questionable inquiry 504 00:27:24,480 --> 00:27:26,960 Speaker 1: into President Clinton. I think that's kind of it's best 505 00:27:27,040 --> 00:27:30,000 Speaker 1: understood from the constitutional point of view. I think she 506 00:27:30,080 --> 00:27:32,439 Speaker 1: got out a little in front of her skis. That is, 507 00:27:32,520 --> 00:27:38,760 Speaker 1: she was a little too decisive about the breaches of 508 00:27:38,880 --> 00:27:43,199 Speaker 1: the constitutional firewall. Let's call it by President Trump pending 509 00:27:43,240 --> 00:27:46,360 Speaker 1: an investigation. Probably it's good to be more cautious and 510 00:27:47,080 --> 00:27:51,960 Speaker 1: um inquisitive rather than categorical. And she said he violated 511 00:27:52,040 --> 00:27:54,720 Speaker 1: his oath of office, which and let's just practice the 512 00:27:54,840 --> 00:27:59,360 Speaker 1: question whether that's true. That's not the constitutional standard. Uh, 513 00:27:59,800 --> 00:28:03,240 Speaker 1: the on social standards, high crimes or misdemeanors, and you can, 514 00:28:03,640 --> 00:28:06,480 Speaker 1: you know, not take care that the lawsby faithfully executed 515 00:28:06,960 --> 00:28:10,680 Speaker 1: by making mistakes honest or even zealous, and you can't 516 00:28:10,720 --> 00:28:14,879 Speaker 1: be impeached for that reason. Truman did that. Most presidents 517 00:28:14,920 --> 00:28:18,359 Speaker 1: have made mistakes honest or not so honest, and that 518 00:28:18,400 --> 00:28:21,760 Speaker 1: doesn't mean they're impeachable. But generally she was in the ballpark. 519 00:28:22,200 --> 00:28:25,160 Speaker 1: Are we anywhere in the vicinity of the high crimes 520 00:28:25,160 --> 00:28:27,960 Speaker 1: and misdemeanors? I think of your dog snow lead out 521 00:28:28,000 --> 00:28:31,600 Speaker 1: into the mud of conquered Massachusetts in the muck and 522 00:28:31,640 --> 00:28:35,240 Speaker 1: there's a high crime and misdemeanor. Is President Trump anywhere 523 00:28:35,280 --> 00:28:39,920 Speaker 1: near the sunsteined definition of high crimes and misdemeanors. I 524 00:28:40,040 --> 00:28:43,680 Speaker 1: want to defend my dog that she, you know, uh, 525 00:28:44,160 --> 00:28:46,320 Speaker 1: maybe make a number one or number two in a 526 00:28:46,360 --> 00:28:48,640 Speaker 1: way that was littally illegal, but that was not a 527 00:28:48,760 --> 00:28:52,800 Speaker 1: high crime in that was just uh inappropriate, let's call 528 00:28:52,840 --> 00:28:55,600 Speaker 1: it um. In terms of President Trump, I would say 529 00:28:55,640 --> 00:28:58,560 Speaker 1: that we need to know more about the facts of 530 00:28:58,640 --> 00:29:02,040 Speaker 1: the most recent turn, which seems to be what Speaker 531 00:29:02,080 --> 00:29:05,760 Speaker 1: Pelosi is principally focused on. So if it's the case 532 00:29:05,920 --> 00:29:09,040 Speaker 1: as the President says that there was an appropriate conversation 533 00:29:09,120 --> 00:29:12,200 Speaker 1: in which he mentioned let's call it the B word, Biden, 534 00:29:12,760 --> 00:29:15,720 Speaker 1: but he didn't put any pressure on or suggest any 535 00:29:15,800 --> 00:29:19,200 Speaker 1: quick pro quo in terms of financial aid, then there's 536 00:29:19,240 --> 00:29:23,800 Speaker 1: really no basis for teaching President Trump in that conversation. Uh. 537 00:29:23,840 --> 00:29:26,920 Speaker 1: If it's the case that it was explicit or implicit 538 00:29:27,040 --> 00:29:32,600 Speaker 1: that he was wielding let's say the taxpayer funding uh 539 00:29:32,800 --> 00:29:39,000 Speaker 1: possibility or not for Ukraine as a inducement to investigate 540 00:29:39,040 --> 00:29:43,360 Speaker 1: a political opponent, Uh, then we're a very severe concern 541 00:29:43,680 --> 00:29:48,320 Speaker 1: as the inquiry and possibly you know, follow up in 542 00:29:48,360 --> 00:29:52,040 Speaker 1: the form of an article of impeachment with the completely legitimate. 543 00:29:52,600 --> 00:29:55,280 Speaker 1: So Professor Sunstein, there's an argument out there that is 544 00:29:55,320 --> 00:29:58,160 Speaker 1: being floated that the real issue that the Democrats should 545 00:29:58,160 --> 00:30:00,200 Speaker 1: focus on is the mere fact that the pres isn't 546 00:30:00,240 --> 00:30:04,000 Speaker 1: it made a phone call to a foreign head of government, uh, suggesting, 547 00:30:04,680 --> 00:30:08,400 Speaker 1: you know, to interfere in our elections by uh investigating 548 00:30:09,000 --> 00:30:13,840 Speaker 1: a political opponent. It wasn't necessarily the quid pro quo. 549 00:30:13,920 --> 00:30:16,120 Speaker 1: It was just a mere phone call asking for interference. 550 00:30:16,160 --> 00:30:19,560 Speaker 1: Is that ring true to you? Uh, it's in the ballpark, 551 00:30:19,880 --> 00:30:23,760 Speaker 1: and you know, whether you're a Democrat or Republican, it 552 00:30:23,920 --> 00:30:28,240 Speaker 1: just is not legitimate. Let's practical the impeachment question for 553 00:30:28,320 --> 00:30:30,720 Speaker 1: the moment, and they'll get there very soon. But it's 554 00:30:30,720 --> 00:30:34,400 Speaker 1: not legitimate for a president of the United States too, uh, 555 00:30:34,560 --> 00:30:37,680 Speaker 1: talk to the head of a foreign country about investigation 556 00:30:38,040 --> 00:30:42,520 Speaker 1: of a political opponent. Uh, even in a context in 557 00:30:42,560 --> 00:30:45,840 Speaker 1: which there's no quick pro quo, and to get to 558 00:30:45,880 --> 00:30:48,800 Speaker 1: the impeachment question, it's not as clear as if there's 559 00:30:48,840 --> 00:30:52,040 Speaker 1: an inducement. But if the president in the context in 560 00:30:52,080 --> 00:30:56,800 Speaker 1: which withheld funds are kind of the elephant in the room, 561 00:30:57,120 --> 00:31:01,560 Speaker 1: and the president saying that and UM let's just say 562 00:31:01,560 --> 00:31:08,080 Speaker 1: that both Republicans and Democrats, UM uh appropriately explore the 563 00:31:08,120 --> 00:31:12,680 Speaker 1: impeachment question. And I say this with um, you know, 564 00:31:12,800 --> 00:31:19,920 Speaker 1: with awareness of the severity and gravity of even the word. 565 00:31:20,440 --> 00:31:22,760 Speaker 1: But but that is the president can't do that. Can't 566 00:31:22,760 --> 00:31:27,000 Speaker 1: say in a context in which everyone knows that there's 567 00:31:27,000 --> 00:31:30,960 Speaker 1: an economic background to this and there's a economic relationship. 568 00:31:31,080 --> 00:31:34,400 Speaker 1: Can't say you investigate a political opponent. Kess Sunstein of 569 00:31:34,480 --> 00:31:36,600 Speaker 1: Harvard Law, We're thrilled that he could be with us today. 570 00:31:36,640 --> 00:31:40,600 Speaker 1: I really can't say enough about his wonderful book, Impeachment. 571 00:31:40,800 --> 00:31:44,720 Speaker 1: It is a sprawling walk through of American history from 572 00:31:44,720 --> 00:31:48,840 Speaker 1: the Revolution to the present day. On Impeachment, We're thrilled 573 00:31:48,880 --> 00:32:04,960 Speaker 1: to have with us today, Kess Sunstein, this is a joy. 574 00:32:05,000 --> 00:32:07,920 Speaker 1: As we've spoken with Roger Ferguson, the former vice chairman, 575 00:32:08,480 --> 00:32:11,360 Speaker 1: with Cass Sunstein of Harvard on Impeachment. One of the 576 00:32:11,400 --> 00:32:16,280 Speaker 1: moments of of this September we speak to David Lipton, now, 577 00:32:16,520 --> 00:32:19,080 Speaker 1: who I believe as title as of this. I'm looking 578 00:32:19,080 --> 00:32:20,800 Speaker 1: at my watch and I think we've got like a 579 00:32:20,840 --> 00:32:25,400 Speaker 1: two hour ticks. Acting Managing Director David Lipton joins us. Now, 580 00:32:25,480 --> 00:32:29,800 Speaker 1: certainly without question. Dr Lipton, the American representative to the 581 00:32:29,880 --> 00:32:33,240 Speaker 1: UH International Monetary Fund to get an update, and it 582 00:32:33,360 --> 00:32:38,160 Speaker 1: is truly a day of celebration for the International Monetary Fund. 583 00:32:38,240 --> 00:32:44,160 Speaker 1: Krystallina Georgieva of Bulgaria, truly a frontline academic, will join 584 00:32:44,360 --> 00:32:46,160 Speaker 1: the i m F. Is it in the matter of ours? 585 00:32:46,280 --> 00:32:48,640 Speaker 1: Dr Lipton? Yeah, this week is a big week of 586 00:32:48,680 --> 00:32:51,880 Speaker 1: transition for us. We have Christine Legard departed, will be 587 00:32:51,920 --> 00:32:56,000 Speaker 1: celebrating her this weekend. We expect Krystalline and Georgieva to 588 00:32:56,000 --> 00:32:59,240 Speaker 1: be approved by our decision body, the Executive Board in 589 00:32:59,280 --> 00:33:02,440 Speaker 1: a matter of ours, and she'll be managing director starting 590 00:33:02,480 --> 00:33:07,479 Speaker 1: Monday morning. It's an extraordinary transition of geography and and tone. 591 00:33:07,760 --> 00:33:12,160 Speaker 1: Is is well uh the former leader of the World Bank, 592 00:33:12,240 --> 00:33:16,280 Speaker 1: of course, esteemed in international economics for years. What does 593 00:33:16,360 --> 00:33:19,719 Speaker 1: the shift like within the institution? Is it just business 594 00:33:19,800 --> 00:33:22,640 Speaker 1: as usual? Well, we're very good at transitions. This happens 595 00:33:22,880 --> 00:33:25,760 Speaker 1: quite a bit. The institution is used to it ready 596 00:33:26,120 --> 00:33:29,240 Speaker 1: to help her take the helm. You know, you're right. 597 00:33:29,400 --> 00:33:33,800 Speaker 1: She has vast experience. Not only is she from Europe, 598 00:33:33,800 --> 00:33:38,080 Speaker 1: but her experience across emerging and developing economies in her 599 00:33:38,120 --> 00:33:41,200 Speaker 1: work uh in in in UH the in Europe and 600 00:33:41,320 --> 00:33:44,920 Speaker 1: at the World Bank. I think gives her a huge 601 00:33:45,000 --> 00:33:49,320 Speaker 1: reservoir of support from our membership really very broadly emerging 602 00:33:49,360 --> 00:33:54,120 Speaker 1: market countries. Correctly say this is the first managing director 603 00:33:54,120 --> 00:33:57,640 Speaker 1: from an emerging market Bulgaria. So everyone's very excited and 604 00:33:57,680 --> 00:34:00,600 Speaker 1: I'm looking forward to this transition myself. Remember the first 605 00:34:00,680 --> 00:34:03,440 Speaker 1: rate Bulgarian mathematics of the Koran School of New York 606 00:34:03,600 --> 00:34:07,760 Speaker 1: University in the academics just extraordinary. I find it fascinating 607 00:34:07,800 --> 00:34:11,440 Speaker 1: here within the tone of modern capitalism, like Angela Merkel 608 00:34:11,560 --> 00:34:17,040 Speaker 1: coming out of East Germany that uh the crystallity GRGIEVA 609 00:34:17,400 --> 00:34:21,439 Speaker 1: came out of the Carl Marks Higher Institute of Economics. 610 00:34:21,880 --> 00:34:24,319 Speaker 1: I mean, there's this is a real shift. This is 611 00:34:24,400 --> 00:34:29,759 Speaker 1: not thesis antithesis, and now we're going to have synthesis. Paul, 612 00:34:29,840 --> 00:34:33,080 Speaker 1: please David, so as a new managing director comes in, David, 613 00:34:33,080 --> 00:34:34,640 Speaker 1: what do you think is the one of the key 614 00:34:34,800 --> 00:34:38,799 Speaker 1: challenges facing the I m F right now? You know, 615 00:34:38,880 --> 00:34:44,040 Speaker 1: we see uh UH risks to growth in the short term, 616 00:34:44,080 --> 00:34:47,680 Speaker 1: and we've had a period of slowing growth in core 617 00:34:47,760 --> 00:34:50,960 Speaker 1: economies for a number of years. After all, just two 618 00:34:51,040 --> 00:34:53,440 Speaker 1: years ago global global growth that's closer to four percent, 619 00:34:53,480 --> 00:34:56,040 Speaker 1: and now it's closer to three percent. So in this 620 00:34:56,160 --> 00:35:02,680 Speaker 1: era where there's questions about integration and interconnectedness and multilateralism, 621 00:35:02,680 --> 00:35:08,040 Speaker 1: the challenges to get our members to cooperate, to ward 622 00:35:08,080 --> 00:35:12,800 Speaker 1: off the risks, to try to secure continued growth UH 623 00:35:12,840 --> 00:35:15,000 Speaker 1: and to promote faster growth in the future. So I 624 00:35:15,040 --> 00:35:19,560 Speaker 1: think it will be a growth orientation achieved through international cooperation. 625 00:35:19,840 --> 00:35:22,880 Speaker 1: One of the threats to that growth orientation is uncertainty 626 00:35:22,920 --> 00:35:26,480 Speaker 1: that we have in the global economy, principally from trade 627 00:35:26,480 --> 00:35:29,360 Speaker 1: issues and uncertainty about global trade. How does that play 628 00:35:29,360 --> 00:35:32,080 Speaker 1: into kind of the mandate at the I m F. Well, 629 00:35:32,120 --> 00:35:35,839 Speaker 1: we do see trade tensions and uncertainty around that as 630 00:35:36,000 --> 00:35:38,880 Speaker 1: as the number one risk. Yes, but but you know 631 00:35:39,440 --> 00:35:42,040 Speaker 1: and and that it is important that the US and 632 00:35:42,200 --> 00:35:45,440 Speaker 1: China sit down and resolve this through dialogue. And I 633 00:35:45,440 --> 00:35:48,719 Speaker 1: think that will mean China having to deal with some 634 00:35:48,800 --> 00:35:53,920 Speaker 1: of the shortcomings in policies that are um causing spillovers 635 00:35:53,960 --> 00:35:56,839 Speaker 1: that are causing discontent in other countries around the world. 636 00:35:57,000 --> 00:35:59,719 Speaker 1: But that said, there are other uncertainties to Brexit is 637 00:35:59,719 --> 00:36:04,480 Speaker 1: a huge John certainty. Um, there are geopolitical uncertainties in 638 00:36:04,520 --> 00:36:08,359 Speaker 1: the in in the tensions with Iran, various others, and 639 00:36:08,400 --> 00:36:14,799 Speaker 1: so if uncertainty is UH allowed to continue, this slowdown 640 00:36:14,800 --> 00:36:18,200 Speaker 1: in trade, which is bringing a slowdown in investment, may 641 00:36:18,400 --> 00:36:22,000 Speaker 1: become a crippling problem for the global economy. It's not 642 00:36:22,040 --> 00:36:26,080 Speaker 1: our base case, our base cases for continued growth UM 643 00:36:26,120 --> 00:36:29,960 Speaker 1: and it really is important that the world work together 644 00:36:30,080 --> 00:36:34,080 Speaker 1: to try to address these uncertainties and not have unforced errors. 645 00:36:34,160 --> 00:36:36,759 Speaker 1: Let's get out front of the meetings that you will 646 00:36:36,800 --> 00:36:38,319 Speaker 1: have here in a number of weeks or at lease 647 00:36:38,400 --> 00:36:40,840 Speaker 1: the World Economic Outlook, the Green Book, the stability. I 648 00:36:40,880 --> 00:36:42,360 Speaker 1: can't remember the color of the books right now. You 649 00:36:42,440 --> 00:36:44,879 Speaker 1: keep changing them, I mean, David, But the bottom line 650 00:36:44,920 --> 00:36:46,759 Speaker 1: is what our audience wants to know, our global Wall 651 00:36:46,760 --> 00:36:49,919 Speaker 1: Street audience wants to know, is the second derivative? Right now, 652 00:36:49,960 --> 00:36:53,040 Speaker 1: I look at Korean export important numbers that German numbers 653 00:36:53,320 --> 00:36:56,320 Speaker 1: the other day. I'm not asking the acting managing director 654 00:36:56,360 --> 00:36:59,240 Speaker 1: to have these memorized, but you're very aware of the GAMA, 655 00:36:59,280 --> 00:37:02,640 Speaker 1: the convexity accelerations that are out there right now. How 656 00:37:02,760 --> 00:37:07,200 Speaker 1: urgent is it. I think that the way to think 657 00:37:07,239 --> 00:37:12,280 Speaker 1: about this is that UH, with the trade tensions we're 658 00:37:12,320 --> 00:37:18,400 Speaker 1: seeing trade investment and manufacturing slowing and that's very broad. 659 00:37:18,920 --> 00:37:22,880 Speaker 1: But at the same time, consumer sentiment, consumer spending, and 660 00:37:22,960 --> 00:37:26,960 Speaker 1: service sector is very strong. And so the question is 661 00:37:27,440 --> 00:37:31,680 Speaker 1: what will happen in the future. Will the um difficulties 662 00:37:31,680 --> 00:37:35,760 Speaker 1: in the business sector eventually impair consumer sentiment and slow 663 00:37:35,800 --> 00:37:40,880 Speaker 1: things down, or will the consumer strength and service sector 664 00:37:40,960 --> 00:37:46,600 Speaker 1: strength eventually help pull business up. That's possible if we're 665 00:37:46,640 --> 00:37:49,799 Speaker 1: able to reduce uncertainties for the future. So I think 666 00:37:49,840 --> 00:37:52,279 Speaker 1: the uh you know to me? The bottom line is 667 00:37:52,520 --> 00:37:56,000 Speaker 1: growth is slowing, risks are growing, and policy makers need 668 00:37:56,040 --> 00:37:57,839 Speaker 1: to get going in That rhymes and it's an easy 669 00:37:57,880 --> 00:38:01,000 Speaker 1: to remember. So well. Evid Lipton with us of the 670 00:38:01,000 --> 00:38:04,880 Speaker 1: International Monetary Fund, the acting managing director here as we 671 00:38:04,920 --> 00:38:09,080 Speaker 1: celebrate Christallina George Eva of Bulgaria will become the new 672 00:38:09,120 --> 00:38:13,600 Speaker 1: managing director, replacing Christine Legard. Christine Legard will become the 673 00:38:13,680 --> 00:38:16,200 Speaker 1: President of the European Center Bank. I'm not gonna ask 674 00:38:16,239 --> 00:38:18,200 Speaker 1: you to get out front of negative interest rates in 675 00:38:18,200 --> 00:38:21,080 Speaker 1: the ECB. That would be rude. But I can I 676 00:38:21,120 --> 00:38:24,160 Speaker 1: ask you. I can ask you, David, the questions of 677 00:38:24,360 --> 00:38:29,400 Speaker 1: our Buenos Aires office. They have a lot of questions 678 00:38:29,600 --> 00:38:33,040 Speaker 1: of how the I m F will handle the original experiment, 679 00:38:33,080 --> 00:38:38,239 Speaker 1: that is Argentine Uh, political economics, even social economics. What's 680 00:38:38,239 --> 00:38:41,239 Speaker 1: the next step for the I m F with an 681 00:38:41,280 --> 00:38:48,200 Speaker 1: ever dynamic Argentina. You know, Argentina's situation right now is 682 00:38:48,239 --> 00:38:51,760 Speaker 1: extremely complex. They've had a shock based on the political 683 00:38:51,800 --> 00:38:56,160 Speaker 1: results of a of a primary and in that setting 684 00:38:56,560 --> 00:38:59,560 Speaker 1: have had to take some very strong measures to try 685 00:38:59,560 --> 00:39:01,840 Speaker 1: to calm things down, and I think they have calmed 686 00:39:01,840 --> 00:39:04,799 Speaker 1: markets down. So our job in this setting is to 687 00:39:04,920 --> 00:39:08,280 Speaker 1: help them get through this period, give them advice, work 688 00:39:08,360 --> 00:39:14,120 Speaker 1: towards an eventual uh resumption of a relationship between of 689 00:39:14,440 --> 00:39:17,040 Speaker 1: some kind of financial relationship with them, which may have 690 00:39:17,080 --> 00:39:21,400 Speaker 1: to wait a while. UM, but we're we're in discussion, 691 00:39:21,560 --> 00:39:25,440 Speaker 1: they are. The Minister is going to be in Washington 692 00:39:26,160 --> 00:39:30,120 Speaker 1: having discussions with our team shortly and we'll be continuing 693 00:39:30,160 --> 00:39:33,320 Speaker 1: those discussions at the the annual meetings that you mentioned 694 00:39:33,320 --> 00:39:35,919 Speaker 1: that come up in later in October. You know, we're 695 00:39:35,960 --> 00:39:39,480 Speaker 1: trying to help Argentina deal with a very difficult situation 696 00:39:39,520 --> 00:39:41,839 Speaker 1: and they're working hard to do that. David, do you 697 00:39:41,840 --> 00:39:45,279 Speaker 1: think the political will exists in Argentina today to move 698 00:39:45,320 --> 00:39:52,560 Speaker 1: that country or rude questions Argentine's want to stabilize their 699 00:39:52,560 --> 00:39:57,319 Speaker 1: country and resume growth. I think everyone shares that it's 700 00:39:57,320 --> 00:40:02,759 Speaker 1: not our business to try to uh uh divine the 701 00:40:03,000 --> 00:40:06,440 Speaker 1: political path forward. We can't do that, but we're standing 702 00:40:06,440 --> 00:40:11,400 Speaker 1: ready to help whichever uh side wins the presidential election 703 00:40:11,960 --> 00:40:14,680 Speaker 1: and help them find the best way forward for the 704 00:40:14,680 --> 00:40:17,600 Speaker 1: sake of the Argentine people. The hallmark of the modern 705 00:40:17,640 --> 00:40:20,520 Speaker 1: I m F is transparency of data. What do you 706 00:40:20,600 --> 00:40:23,680 Speaker 1: do in any given nation where you haven't quoted in 707 00:40:23,680 --> 00:40:27,480 Speaker 1: this case Argentine and Paso in a black market set 708 00:40:27,520 --> 00:40:31,080 Speaker 1: with a greater depreciation, how does the institution like you 709 00:40:31,160 --> 00:40:36,399 Speaker 1: deal with the multiple markets of currency or yield day 710 00:40:36,440 --> 00:40:38,839 Speaker 1: to day. Look, there are places where data are are 711 00:40:38,880 --> 00:40:42,760 Speaker 1: a big problem, like Venezuela where the data flow has stopped, 712 00:40:42,800 --> 00:40:45,160 Speaker 1: but that's not the case in Argentina. We've dealt with 713 00:40:45,719 --> 00:40:49,800 Speaker 1: countries that have parallel markets in many, many circumstances before. 714 00:40:49,880 --> 00:40:53,040 Speaker 1: That's not a big challenge. You know, they're they've had 715 00:40:53,080 --> 00:40:56,560 Speaker 1: to put on capital controls in the midst of the 716 00:40:56,600 --> 00:40:59,520 Speaker 1: market developments that they've had. And when you have capital controls, 717 00:40:59,520 --> 00:41:02,960 Speaker 1: of course, some people try to um uh look for 718 00:41:03,000 --> 00:41:05,680 Speaker 1: another way to move money out of the country and 719 00:41:05,760 --> 00:41:09,560 Speaker 1: parallel rates arise. I think that's something that we can 720 00:41:09,760 --> 00:41:13,640 Speaker 1: monitor and we can help them over time deal with UH. 721 00:41:13,680 --> 00:41:16,520 Speaker 1: You know, I think the bigger the bigger issues there 722 00:41:16,560 --> 00:41:20,799 Speaker 1: are how to calm the markets and stabilize the situation 723 00:41:21,320 --> 00:41:25,360 Speaker 1: so that there can be UH an administration after the 724 00:41:25,400 --> 00:41:29,359 Speaker 1: election that makes longer term plans and policies that can 725 00:41:29,400 --> 00:41:34,480 Speaker 1: help bring stability, lasting stability and growth to Argentina. You 726 00:41:34,520 --> 00:41:37,040 Speaker 1: mentioned that it's a very complex issue obviously. Is there 727 00:41:37,080 --> 00:41:39,200 Speaker 1: any sense of timing based upon your discussions with the 728 00:41:39,200 --> 00:41:42,799 Speaker 1: administration of maybe how this might play now, It's too 729 00:41:42,800 --> 00:41:44,680 Speaker 1: soon to be able to say that. I mean, we 730 00:41:44,719 --> 00:41:47,320 Speaker 1: we were having discussions with them. Those will be continuing 731 00:41:47,320 --> 00:41:49,560 Speaker 1: in Washington this week and then again during the meetings. 732 00:41:49,880 --> 00:41:52,320 Speaker 1: You know, their election is coming up later in October. 733 00:41:52,920 --> 00:41:56,000 Speaker 1: It's it's just uh, not something one can foresee if 734 00:41:56,040 --> 00:41:58,000 Speaker 1: you're just joining us a few more minutes with David 735 00:41:58,040 --> 00:42:01,000 Speaker 1: Lipton and the International Monetary Phone. Of course out of 736 00:42:01,000 --> 00:42:05,080 Speaker 1: Wesleyan and Harvards sterling economics over the years, and I 737 00:42:05,120 --> 00:42:07,200 Speaker 1: always David love to go back with you to your 738 00:42:07,600 --> 00:42:10,360 Speaker 1: tenure with Jeffrey Sachs on Russia. Could we go you 739 00:42:10,400 --> 00:42:13,360 Speaker 1: have a visceral I would suggest you and Professor Sachs 740 00:42:13,400 --> 00:42:16,880 Speaker 1: have more of a visceral understanding of the Russian economic 741 00:42:16,960 --> 00:42:21,440 Speaker 1: experiment out of n than anyone breathing. And give us 742 00:42:21,480 --> 00:42:25,720 Speaker 1: an update on putin economics in the strength of Russia 743 00:42:25,840 --> 00:42:28,640 Speaker 1: right now, he had a difficult Moscow election. Granted that's 744 00:42:28,640 --> 00:42:32,600 Speaker 1: a one off, but give us an update on Russia. 745 00:42:32,719 --> 00:42:36,080 Speaker 1: Is a frontier economy, an E M economy, or a 746 00:42:36,120 --> 00:42:41,239 Speaker 1: G eight nation. The Russian economy has been managed very 747 00:42:41,320 --> 00:42:45,520 Speaker 1: well from the standpoint of macroeconomic stability. They've been very 748 00:42:45,560 --> 00:42:50,320 Speaker 1: careful about their maintaining a sound budget. As a result, 749 00:42:50,360 --> 00:42:54,920 Speaker 1: they have almost no uh federal debt. Uh. You know, 750 00:42:55,000 --> 00:42:58,680 Speaker 1: President Putin has given strong mandates to his Central Bank 751 00:42:58,680 --> 00:43:01,800 Speaker 1: governor nev you in a too, make sure that inflation 752 00:43:01,880 --> 00:43:05,279 Speaker 1: is under control. That's not the issue they have as 753 00:43:05,440 --> 00:43:11,719 Speaker 1: as a result of there the oil situation and the 754 00:43:11,760 --> 00:43:15,000 Speaker 1: economic situation and the sanctions, they have a low growth rate. 755 00:43:15,560 --> 00:43:18,960 Speaker 1: When we project their growth rate forward, we see it 756 00:43:19,000 --> 00:43:23,200 Speaker 1: as lower than or roughly the same as Europe in 757 00:43:23,280 --> 00:43:25,800 Speaker 1: per capita terms. Now that what that means is we 758 00:43:25,880 --> 00:43:30,200 Speaker 1: are not foreseeing Russian standards of living catching up or 759 00:43:30,239 --> 00:43:33,359 Speaker 1: going in the direction of catching up to Europe. That's 760 00:43:33,400 --> 00:43:36,200 Speaker 1: a problem because their their their standard living is lower 761 00:43:36,200 --> 00:43:38,480 Speaker 1: than Europe, and they should be able, they should be 762 00:43:38,520 --> 00:43:41,879 Speaker 1: aspiring to raise that standard of living. So I think 763 00:43:41,920 --> 00:43:46,160 Speaker 1: the challenge for Russia is the broader, long term business 764 00:43:46,200 --> 00:43:49,560 Speaker 1: model question. What is their strength where they they are 765 00:43:49,560 --> 00:43:54,839 Speaker 1: a country with great uh education and great technological prowess. 766 00:43:54,880 --> 00:43:58,399 Speaker 1: The question is how to build a system that has 767 00:43:58,920 --> 00:44:03,759 Speaker 1: a stronger private sector drive in the adoption and use 768 00:44:03,840 --> 00:44:08,400 Speaker 1: of technology in ways that will bring prosperity to Russia. 769 00:44:08,480 --> 00:44:12,279 Speaker 1: That's the challenge. I think they understand that, but that's 770 00:44:12,320 --> 00:44:15,520 Speaker 1: the challenge. But this is fascinating because with you and 771 00:44:15,600 --> 00:44:19,680 Speaker 1: Jeff Sex at the nascent capitalism of the collapse of 772 00:44:19,719 --> 00:44:21,960 Speaker 1: the Soviet Union, you go to the era I'm going 773 00:44:22,000 --> 00:44:25,279 Speaker 1: to say, the oligarchs or whatever that means. How do 774 00:44:25,320 --> 00:44:29,600 Speaker 1: you perceive Russian capitalism forward? Do they move beyond the 775 00:44:29,760 --> 00:44:33,359 Speaker 1: early models of the nineties and the two thousand's. Well, 776 00:44:33,400 --> 00:44:35,680 Speaker 1: I don't know quite how they get from where they 777 00:44:35,680 --> 00:44:38,600 Speaker 1: are to what I'm talking about, because I think it 778 00:44:38,680 --> 00:44:42,759 Speaker 1: does mean uh having a system in which there's a 779 00:44:42,760 --> 00:44:50,200 Speaker 1: more vibrant private economy with true competition and UH corporations 780 00:44:50,360 --> 00:44:56,640 Speaker 1: that are able to UH compete with global counterparts and 781 00:44:57,120 --> 00:45:02,359 Speaker 1: be modern, and it's I think it's not happening sufficiently 782 00:45:02,400 --> 00:45:05,319 Speaker 1: at this point, and to me that the challenge for 783 00:45:05,360 --> 00:45:09,759 Speaker 1: them is to find a way to have a more vibrant, vigorous, 784 00:45:10,160 --> 00:45:14,200 Speaker 1: dynamic private sector. David, are we seeing direct private investment 785 00:45:14,280 --> 00:45:16,920 Speaker 1: in Russia today? Just give us a sense of our companies, 786 00:45:17,000 --> 00:45:20,120 Speaker 1: Western companies investing in Russia. I think it's modest and 787 00:45:20,160 --> 00:45:25,920 Speaker 1: more modest than before the the UH conflict in Ukraine 788 00:45:26,400 --> 00:45:30,239 Speaker 1: led to sanctions and great hesitancy on the part of 789 00:45:31,080 --> 00:45:35,360 Speaker 1: UH country companies from a number of Western countries uneasy 790 00:45:35,520 --> 00:45:38,680 Speaker 1: about their participations. David Lipton, thank you so much. We 791 00:45:38,719 --> 00:45:40,480 Speaker 1: look forward to all of us at Bloomberg to your 792 00:45:40,520 --> 00:45:44,080 Speaker 1: meetings here. He's I'm gonna say this to the acting 793 00:45:44,120 --> 00:45:48,920 Speaker 1: managing director do one more time as we truly celebrate 794 00:45:49,680 --> 00:45:53,560 Speaker 1: the changing of the guard APTI UH International Monetary fune 795 00:45:53,680 --> 00:45:57,640 Speaker 1: Krystelina or Gava will take over as managing director of 796 00:45:57,640 --> 00:46:01,799 Speaker 1: course Frontline Economics from Bulgaria. Dr Lipton, thank you so 797 00:46:01,880 --> 00:46:06,880 Speaker 1: much for joining us Bloomberg Surveillance. Thanks for listening to 798 00:46:06,920 --> 00:46:11,480 Speaker 1: the Bloomberg surveillance podcast. Subscribe and listen to interviews on 799 00:46:11,520 --> 00:46:17,359 Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm 800 00:46:17,400 --> 00:46:20,719 Speaker 1: on Twitter at Tom Keene before the podcast. You can 801 00:46:20,760 --> 00:46:23,960 Speaker 1: always catch us worldwide. I'm Bloomberg Radio